Taxes Have Congress Avoiding Roads Bill as Money Runs Low

Construction crews prepare to pour concrete as part of a Caltrans Bridge expansion project to widen State Route 76 in San Diego County, California. A compromise measure that used general tax revenue to keep highway construction going expires Sept. 30, and Congress’s research arm has said lawmakers can no longer delay broader action. Photographer: Sam Hodgson/Bloomberg

Jan. 9 (Bloomberg) -- Congress’s partisan divide over tax
increases is jeopardizing action on a long-term highway bill
backed by industry groups, raising the risk that the U.S. will
run out of money to pay for projects next year.

Groups led by the U.S. Chamber of Commerce, the biggest
business lobby, want to prevent a repeat of 2012, when proposals
to fund roads, bridges and mass transit for six years sputtered
over bipartisan opposition to raising the U.S. gasoline tax. A
compromise measure that used general tax revenue to keep highway
construction going expires Sept. 30, and Congress’s research arm
has said lawmakers can no longer delay broader action.

“Based on the performance of the Senate over the last
three years, a six-year highway bill is a pretty big
expectation,” Senator Roy Blunt, a Missouri Republican, said in
an interview. “These discussions are important to have, but I
don’t have any real faith at this point that they lead in a
direction that produces a long-term result on highways.”

While the legislation’s supporters and business groups
point to the House’s passage of an $8.2 billion water projects
bill last year as a breakthrough on infrastructure spending,
that measure didn’t require a large tax increase.

Senator Carl Levin, a Michigan Democrat, said the same
Republican opposition to tax increases that has dashed a drive
for a broad deficit-reduction package shows no sign of abating.

“I think it would be difficult given the Republican view
of revenue, any kind of revenue,” Levin said of the six-year
measure that industries covet. “It would be very, very hard.”

High Stakes

In July, the nonpartisan Congressional Budget Office
projected that the U.S. Highway Trust Fund, which pays for road
and bridge projects, will be insolvent by 2015 unless Congress
raises the gasoline tax, bails out the fund again with general
tax dollars, or eliminates most highway spending. The balance in
the highway portion of the fund as of the end of November was
$9.22 billion, down 23.7 percent from a year earlier, according
to the Federal Highway Administration.

The gasoline tax has stayed at 18.4 cents a gallon since
1993 and isn’t indexed to inflation. Revenue from the levy has
declined since 2007 through a combination of a lagging economy,
fewer miles driven and more efficient cars.

The tax’s purchasing power has declined almost 40 percent
over the past two decades, according to the American Association
of State Highway and Transportation Officials. Alternative tax
proposals, including one based on miles driven, have garnered
little support beyond local experiments.

Gasoline Tax

The U.S. Chamber and other groups that usually support
Republicans have endorsed a bill introduced in December by
Representative Earl Blumenauer, an Oregon Democrat and member of
the Congressional Progressive Caucus, that would boost the
gasoline tax by 15 cents a gallon over three years.

Former Transportation Secretary Ray LaHood yesterday called
for raising the tax by 10 cents a gallon and indexing it to
inflation. Noting that the last increase under President Bill
Clinton helped reduce the federal deficit, he told reporters in
Washington, “If that’s a way to get conservative Republicans
behind it, so be it.”

Some Republican lawmakers, particularly in the House, want
to move all responsibility for road projects to the states.
Representative Scott Garrett, a New Jersey Republican who voted
against the current highway bill, said that tax increases needed
to bolster federal infrastructure also clash with election-year
politics.

“I don’t think either side of the aisle wants to say that
going into an election year that the last bipartisan piece of
legislation that I passed was a tax increase on my constituents
and those who can least afford it,” Garrett said.

Water Bill

Business groups say a longer-term measure could boost the
slow-growing economy while benefiting construction companies
like Caterpillar Inc. They say the short duration of the current
law has created uncertainty for companies involved in long-term
projects, and also for the state and local officials who decide
the terms of contracts.

Chamber President Tom Donohue yesterday said the
organization will aggressively back “pro-business” candidates
in Republican primaries this spring against candidates who
oppose its agenda, including a long-term infrastructure bill.

Business groups last year confronted Tea Party Republicans
who questioned the constitutionality of federal spending on
water projects, pointing out that George Washington in 1783
extolled the benefits of boosting commercial waterways. The $8.2
billion bill passed the House on a 417-3 vote.

‘Fatal Flaw’

They also made some inroads two years ago in the highway
bill debate, said Sean O’Neill, a highway and transportation
lobbyist with Associated General Contractors in Arlington, Va.
His group won support from some Republicans on the House
transportation panel who initially opposed a federal role in
highway projects, including Representatives James Lankford of
Oklahoma and Steve Southerland of Florida.

“We’ve been focused and continue to focus on members who
have come in since 2010, and educated them on the need to have a
strong federal role in our transportation sector,” O’Neill
said.

Representative Bill Shuster, a Pennsylvania Republican
who’s chairman of the House transportation committee, sees the
water bill as a model for highway legislation and will engage
governors, companies, unions and others in his effort, said Jim
Billimoria, his spokesman.

“It will be a wide breadth of organizations that help to
spell out what they would like the bill to look like,”
Billimoria said.

Shuster is being challenged in this year’s Republican
primary by a Tea Party-backed candidate who has criticized his
support for infrastructure spending.

Oil Tax

Unlike the water bill, which probably will see final
passage by March, the highway legislation has what
transportation analyst Joshua Schank calls a “fatal flaw:” the
need for a tax increase of some kind.

“They may have the appetite, but that doesn’t mean that
they have the ability,” said Schank, president and chief
executive officer of the nonpartisan Eno Center for
Transportation in Washington.

Senator Barbara Boxer, a California Democrat and chairman
of the Environment and Public Works Committee, proposed in
September replacing the gasoline tax with a levy paid on oil at
refineries. She has said such a tax, which has been floated by
research groups including Rand Corp. and the Carnegie Endowment
for International Peace, could generate enough revenue to fund
highways and mass transit for six years.

Obama Factor

Boxer is in talks with Senator David Vitter of Louisiana,
the top Republican on the panel, to move a joint highway bill.
Vitter is open to some kind of revenue increase, although the
two haven’t agreed on the method, said Luke Bolar, a Vitter
spokesman.

Janet Kavinoky, executive director of transportation and
infrastructure at the U.S. Chamber, said her group doesn’t see a
viable alternative to raising the gasoline tax. Companies
belonging to the National Association of Manufacturers are open
to alternatives, said Rosaria Palmieri, a top lobbyist for the
trade group.

Business groups are talking about including changes in
highway programs, such as faster turnaround times on contracts,
that can appeal to lawmakers who want less spending and
regulation, Kavinoky said.

“We’ve got to be able to make the argument through laying
out policy reforms and showing the benefits of transportation
that you can believe in a smaller federal role and budget
discipline, but you can do that while you’re still promoting
maintaining federal investment in infrastructure,” she said.

President Barack Obama, who didn’t offer a proposal in 2012
for how to pay for increased roads spending, could shape the
debate if he steps in more aggressively, Palmieri said.

“There’s a big unknown in the debate: What role will the
president play?” Palmieri said.